The complete degradation of Yperite (bis(2-chloroethyl) sulfide), a chemical warfare agent, was achieved by two basidiomycetous cultures. Two distinct metabolic pathways were detected in each fungus during degradation of Yperite. The major path involved a non-enzymatic hydrolysis to generate thiodiglycol. In the minor path, the sulfide bond was cleaved prior to the hydrolytic dechlorination reaction, yielding chloroethanol and chloromercaptoethane, both of which were then metabolized completely.